The €4.2bn media pension fund PNO said it lost 1.8 percentage points of its 4.5% return on investments due to a 50% interest hedge on its liablities, following rising interest rates last year.

It closed 2013 with a funding just over the required minimum of 105% – meaning the scheme is still at risk, the board said in its annual report.

It concluded that, as a result, indexation before 2017 was unlikely, with inflation compensation currently in arrears of 17.5%.

With a yield of 13%, equity was PNO Media’s best performing asset class. The scheme chiefly attributed the under-performance of 0.8 percentage point to disappointing performance of investments in the Far East, as well an under-weight in Japanese equity, which performed well.

In contrast to high returns of equity developed markets – European small caps delivered 37% – the media scheme incurred losses on investments in Latin America and Asia, following disappointed growth and a drop in local currencies.

It reported a 2.7% loss on its fixed income investments – an out-performance of 1.1% – with the underlying portfolios showing mixed results.

Dutch mortgages and credit generated 7.3% and 3.2% respectively. However, the pension fund lost 8% on its emerging markets bonds, while its investments in euro-denominated bonds delivered -5.9%, following rising interest rates, it said.

Property investments – in non-listed residential and retail funds, chiefly in the Netherlands and other Western Europe – returned 0.6%.

PNO Media further attributed the modest 1.5% yield of its infrastructure holdings to the addition of two new funds during their (expensive) start up phase.

Private equity – in a joint portfolio with the €12.6bn railways scheme SPF – produced 6% last year, it said.

PNO Media’s board indicated that it had decided to slightly decrease the strategic weighting of emerging market equity, property, private equity and credit, in favour of developed country equity, mortgages and government bonds.

Last year, it reduced the pensions contribution from 19% to 17.6% of the salary, following lower pension costs, triggered by a decrease of the yearly pensions accrual as well as the rise of the official retirement age to 67.

PNO Media reported administration costs of 220 euro per participant, and said it had spent 0.72% and 0.16% of its assets respectively on asset management and transactions.